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Tax bills for rich families approach 30-year high

Published on NewsOK
Modified: March 3, 2013 at 11:55 am •
Published: March 3, 2013

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This photo taken March 2, 2013, shows the Internal Revenue Service building at the Federal Triangle complex in Washington, Saturday, March 2, 2013. According to projections by the Tax Policy Center, a research organization based in Washington, wealthy families are paying some of their biggest federal tax bills in decades, even as the rest of the population continues to pay at historically low rates. And a new analysis by the Congressional Budget Office shows that average tax bills for high-income families have rarely been higher since the Congressional Budget Office began tracking the data in 1979, while middle- and low-income families aren't paying as much as they used to. (AP Photo/ roomManuel Balce Ceneta)

For example, the Internal Revenue Service tracks tax returns for the 400 highest-paid filers each year. Those taxpayers made an average of $202 million in 2009, the latest year available. Their average federal income tax rate: 19.9 percent.

That's still higher than the tax rate paid by most middle-income families, but not by much.

The middle 20 percent of U.S. households — those making an average of $46,600 — will pay an average of 13.8 percent of their income in federal taxes for this year, according to the Tax Policy Center. Over the past three decades, the average federal tax rate for this group has been about 16 percent.

The Associated Press analyzed two sets of data to compare tax burdens over time.

The CBO produces data from 1979 to 2009; the center has overlapping data from 2004 through 2013. Both get tax data from the IRS, but they use slightly different methodologies to calculate federal tax burdens.

Still, their numbers track closely enough to make some general observations. For example, it is clear that for 2013, average tax bills for the wealthy will be among the highest since 1979. It also is clear that federal taxes for middle- and low-income households will stay well below their averages for the same period.

Liberals and many Democrats say rich families can afford to pay higher taxes because their incomes have grown much more than incomes for middle- and low-income families.

Average after-tax incomes for the top 1 percent of households more than doubled from 1979 to 2009, increasing by 155 percent, according to the CBO. Average incomes for those in the middle increased by just 32 percent during the same period while those at the bottom saw their incomes go up by 45 percent.

"You've got to think about the context," said Chuck Marr, director of federal tax policy for the Center on Budget and Policy Priorities, a liberal think tank. "We just had three decades in the United States where we had a tremendous increase in inequality."

The growing disparity in income is a big reason why tax bills for the rich are approaching 30-year highs, Williams said. As the rich get richer, a greater share of their income is taxed at the top rate, he said.

High-income families also have been targeted by tax increases this year, including a new tax law passed by Congress on Jan. 1 as well as tax increases in the president's health care law.

The new tax law made the federal income tax more progressive, increasing the top tax rate from 35 percent to 39.6 percent, on taxable income above $400,000 for individuals and $450,000 for married couples filing jointly. Lower tax rates on income below those amounts were made permanent. Also, tax breaks for low-income families first enacted as part of Obama's 2009 stimulus package were extended through 2017.

Conservatives say raising taxes again on the wealthy would reduce their incentive to save and invest, hurting long-term economic growth.

"Raising taxes hurts the economy, and raising taxes on upper-income individuals — whether those who work for salaries or those who save and earn capital income — always hurts the economy the most," said J.D. Foster, a fellow at the conservative Heritage Foundation. "Spite and envy are not sound bases for public policy."

Besides, Republican leaders in Congress say, one tax increase a year is more than enough.

"Let's make it clear that the president got his tax hikes on Jan. 1," House Speaker John Boehner, R-Ohio, said Friday. "This discussion about revenue, in my view, is over."